How the debt crisis could affect federal workers

Jul 27, 2011

If you're a federal worker, then a debt fallout might affect you more than you think. Joe Davidson and Eric Yoder chatted about what government workers stand to lose if a plan to raise the debt ceiling isn't met by next week's deadline.

This is Joe Davidson, Federal Diary columnist. I'm just signing on and it's clear that you have more questions than we have answers. We'll keep trying to get answers as we continue to report this story.

Best,

Joe

Eric Yoder

Hello everyone. This is staff writer Eric Yoder. Lots of questions out there about how the debt ceiling standoff could affect federal employees and retirees--both what would happen if no agreement is reached by next Tuesday and what types of cuts might be in any agreement.

If a plan isn't reached by Aug. 2, will federal workers still have show for work?

A: Eric Yoder

That's undetermined. Lots of ways this could play out including widespread furloughs (unpaid) for some employees while keeping other employees whose jobs are emergency in nature on the job. That was the plan earlier this year when a shutdown loomed, but they did reach an agreement then and it never came to that.

Under one analysis done for Congress, agencies would have the authority to keep everyone on the job, with the promise that they would be paid later. That differs from a shutdown situation, where only emergency employees can be kept on the job.

Presumably the government would have to set priorities on where it would spend the money it would have available. There's widespread expectation that interest on existing bonds would be paid first, so that financially speaking, there would not be a default. After that, it becomes a guessing game. The White House has said it can't promise that Social Security payments due in early Aug. would be paid, and under that scenario, it's hard to see them paying federal retirement benefits.

My mother depends on her monthly social security check. If the government defaults next week, will she get her still get her money?

A: Eric Yoder

As I mentioned above, the White House says there's no guarantee that SS benefits will be paid on time. Paying interest on bonds already outstanding and paying SS and a few other benefits would leave little for other operations. So it would require very tough decisions.

It would not affect salary rates. Whether employees would receive pay would depend on whether the government decided to devote enough of the available money to pay employees. Unpaid furloughs certainly are on the table.

We're posting a q and a on the Fed Page today addressing this. As it says, one issue is that pay cycles are every two weeks. If any default is over in that time frame, and if Congress and the White House agree that employees should be paid for any furlouogh time, then effectively it would not make any difference. Those are ifs, however.

Are furloughs/rifs going to be the new normal? It appears this Congress can't achieve consensus on anything. Next year's budget is only months away, Will job security/employment for federal employees always be at risk?

A: Joe Davidson

I don't think furloughs and rifs are the new normal, but they might be around for a period into the near future and that includes through next year's budget process.

Can a Federal agency require employees to work without pay in the event of a debt ceiling default? Or does the employee have the option to be furloughled without jeopardizing his/her employment status?

A: Eric Yoder

Using appropriation lapse shutdowns as a guide, agencies can compel "emergency" workers to come to work even without pay. All but about 800,000 of the 2.1 million feds have that designation. A default situation is unexplored territory. It's possible that agencies could compel everyone to continue working, with the expectation that they would be paid eventually. As above, if it's short enough and depending on the timing, it could work that there are no disruptions in pay at all.

Is a government shutdown going to actually happen? How will we know for sure in order to make arrangements to prepare for the loss of pay? Also, I believe that the uncertainty is causing more of a disruption in federal workers than need be. They need to do it and get it over or not do it at all, so we can try to move on.

A: Joe Davidson

The uncertainty is very disturbing for everyone, particularly federal workers. But no one can say with certainty at this point if the government will fail to raise the debt ceiling or not or what a default would mean in terms of offices closing, cutbacks in services and employee furloughs.

Under the normal furlough rules, the health insurance continues on for up to a year I think. However, the possiblity exists that the insurance bill would not be paid according to today's WP. How real is that possibilty? What are federal workers supposed to do? When is OPM going to address this and other issues regarding the possible furlogh that would start if federal workers are not paid, etc. ?

A: Eric Yoder

If funding lapse shutdown policies are followed, health insurance would continue uninterrupted, and for employees put on nonpay status, and assuming that status would continue past the next pay date, the employee's obligation would accumulate and would be taken out of the next pay received.

But of course, that's an assumption. We have tried repeatedly to get OPM to answer questions about this and they have refused. The administration's stance is that it doesn't think a default will happen and therefore all of this talk is speculation. But employees such as yourself do have real concerns.

Using this past spring as a guide when a shutdown loomed, the administration did not provide any guidance until literally the day before the shutdown was to happen. Until then, you can only watch and wait.

Is there a definite plan in place to prioritize the payment of bills if the debt ceiling is not raised by August 2? If not, will Federal workers receive their next paycheck (due between August 5 and 9), which will have been earned at the end of this week? After that, will Federal employees be paid ahead of others? I always heard when working in the private sector that if a company is in financial trouble, it should always pay its own people first.

A: Eric Yoder

No plan of priority has been announced, and even the concept that they would pay interest on existing debt first is only an assumption. Certainly somebody must be working on it, but administration officials aren't saying. Good point about taking care of your own people, but in this political environment, you hve to wonder whether they would do that. I can't imagine federal employees getting paid, for example, if Social Security recipients don't get their benefit checks.

Any word on how the crisis is affecting/will affect the hiring process at agencies?

A: Joe Davidson

I think hiring has slowed at many agencies and some have offered buyouts, while others are considering that. Also, I wonder how all this drama affects potential recruits to the federal government. Uncle Sam may not appear to be such a solid employer.

Probably it would depend on the cycle of payments. If the government already has paid your company for work to be done in August, or even beyond, likely there would be no effect. If your company bills the goverment monthly for work already done, you'd have to question whether any payments due in early August would be made. One complicating factor is that sometimes contracts include penalty clauses for late payment, and the government might want to avoid having to make such extra payments, but again, if it comes down to paying a contractor before a Social Security recipient or a disabled veteran, you can judge for yourself who is likely to get paid first.

One would hope that your employer would have enough money on hand or would have access to credit sufficient to pay your next paycheck. And again, a lot of this depends on how long this would last.

Our faith. In the system. In our political "leaders". That we'll ever be able to buy a house or pay off our student loans. I'm even questioning whether to stay in America or start looking for work in Europe or Canada.

A: Joe Davidson

This note reflects a cost to the system that cannot be quantified with dollars and cents.

I'm scheduled to be on travel in Europe next week--will I get called home? Will the travel orders be interrupted? Should I consider not going??

A: Eric Yoder

I doubt you would be called home, but technically speaking you could be furloughed while overseas and told not to do the work you were sent there to do. Wasteful, but that's the kind of thing that can happen in these situations.

In the spring, we all prepared for a government shut down with long lists of non-essential workers. So far, we've had no such charge from OPM, yet Aug 2nd is coming quick. What should we be prepared for?

A: Joe Davidson

OPM and OMB waited until almost the last minute before the shutdown was averted to provide information about essential workers. I assume a similar scenario will play out this time. We're getting closer and closer to the last minute every day.

If the debt ceiling is not raised by August 2, will congressmen and senators continue to get their checks?

A: Eric Yoder

Members of Congress are paid monthly, I believe. I don't know the exact pay date--I believe they are paid at the end of each month for the work done that month. So presumably they would get paid for July effective Aug. 1, and it's hard to imagine a default lasting long enough to affect the pay they would receive Sept. 1.

How will it affect the National Weather Service employees? It won't affect USPS workers, because they are owned, but not operated by the government, correct? Thank you!

A: Joe Davidson

I don't know how it would affect the Weather Service. If some of its employees were deemed essential at the time of the averted shutdown, I assume that would be the case this time. USPS operating expenses are funded by the sales of its goods and services, not tax dollars, so it would not be affected. But USPS has its own money troubles.

Not a question, but a comment--changing our pension benefits in the middle of the game is BS. Higher contributions, high 5 instead of high 3, and changing the multiplier (this would probably have the most significant impact). This is not what we bargained for when we joined the government. If the multiplier is going to change, at least don't make it retroactive for the years we've already earned the 1%.

A: Eric Yoder

All of those things have been under discussion. Certainly for equity's sake, there is an argument that employees who took federal jobs and worked with the understanding of certain future benefits being promised should not be affected. But if you make things prospective only, you don't see any budgetary savings until decades from now. The rules of the game can be changed, unfortunately. Look at the Social Security reforms of the 80s--raised the employee contribution, raised the retirement age, and so on.

Your blog was the first to bring up the possibility of changing working actual pension formula. Is this realistic? Is it to be grandfathered in like FERS version 2? I'll just say that this came out of left field to all of us close to retirement.

A: Joe Davidson

Nothing is certain on that. My guess is that major changes to the retirment system would apply to new hires and, at the least, not to those close to retirement.

I'm a federal worker. I work in Washington. I sit at my desk and look out my window watching ducks swim in the pond. I must work seven hours a day, four days a week, until I can retire at age 45 with full benefits. Will my pension be affected by the debt talks?

A: Eric Yoder

We'll assume this is tongue in cheek. But it does illustrate the very real backlash that exists against federal employee benefits, particularly retirement, and particularly given the way the economy has been in recent years.

I'm in the State Department overseas and my local colleagues are laughing at us. Does the Congress care that will look like a developing country?

A: Joe Davidson

This reminds me of an editorial cartoon, can't recall whose, that pictured the leaders of Iraq and Afghanistan looking at a newspaper report about the debt crisis and wondering if the U.S. is ready for self government.

I would like to see an economic analysis of lost productivity due to 2.1 million employees spending trying to get answers to such basic questions as coming to work or being able to pay the mortgage - both during the spring and currently. Not a good way to run a business.

Earlier this year, federal employees were told that they needed to prepare for the possibility of an "orderly" government shutdown. I'm not sensing the same sense of urgency this time around. Any idea why?

A: Eric Yoder

Back in the spring, there was a lot of the same kind of angst that exists today over furloughs, who would get paid and when, etc. But in terms of urgency in planning, the administration showed virtually none at that time, until literally the last minute, nor is it showing urgency today. They seem to be trying to downplay the possibilities of default to calm the financial markets, but the effect on employees is uncertainty.

Yesterday I read that the Gang of Six was recommending at a minimum a freeze on COLAs for Feds for the next 5 years and a change in the retirement system to High 5 (not High 3). Is there anything new about this?

A: Eric Yoder

No, all of these ideas have been in circulation actively since the debt commission report last December, and ideas such as high-5 have a very long history indeed--going back to the 90s, at least.

Eric, You say if there's a default, "emergency" workers will stay on. What is the difference between "emergency" workers and "essential" workers? Is there a difference, or are you now changing the term for political reasons? Thank you.

A: Eric Yoder

There is no difference that I'm aware of. "Emergency" is the term the government now uses, because the old term "essential" obviously raises the question--if someone's job isn't essential, why does the government have such a position in the first place? I think the change in terminology was made during the previous administration--does anyone know when?

The federal government is facing a serious braindrain in the near future. Baby boomers are (and will be) retiring in droves. How do you think these shutdowns, budget crises, etc will effect recruitment?

A: Joe Davidson

I don't see how it can help recruitment. This situation certainly hurts Uncle Sam's reputation as a strong, secure employer. But with the economy still in the dumps and unemployment high, the private sector isn't always a great place for recruits either.

Is there specific language in any proposed legislation for the debt limit that would change FERS rules?

A: Eric Yoder

None of the proposals that have been reduced to legislative language so far go into that level of detail. But there's a general assumption that such language would be in whatever later laws would be needed to actually carry out the goals.

Last time when an appropriations shutdown loomed, we received an 11th hour email notification of our furlough status (ie, whether or not we were considered essential personnel and thus whether we would be compelled to work during a government shutdown). Is it safe to assume that those "furlough status" decisions would hold true if a government shutdown occurred due to the debt ceiling standoff?

A: Eric Yoder

I don't think anything is safe to assume, but that's the only basis on which to operate, without any word coming from the White House. Check the q and a being posted today on the Fed Page. Again, it's possible both that large numbers of employees will be furloughed, in which case the "emergency" designations of the spring likely would be the best guide as to who would stay on the job, and it's also possible that everyone would be kept on the job because unlike an appropriations lapse shutdown, the government would remain free to continue taking on spending obligations including employee salaries.

Why is interest on bonds get a higher priority than social security payments? It is not that the government has an obligation to pay the interest, but not an equal obligation towards social security payments, or retirement - they were all promised, weren't they?

A: Eric Yoder

I think the answer to that goes to the credit worthiness of the nation in financial markets. If that goes down the tubes, a late Social Security payment will be an afterthought.

If you work at a federal agency for certain amount of time, you can never be fired or laid off, unless you commit misconduct. Will this type of job security still continue or will there be impetus to stop this rule.

A: Eric Yoder

That is not literally true, of course. Federal employees like many workers serve a probationary period--for feds, it's a year, which actually is longer in my experience than what many private companies offer. After the year, employees gain the right to appeal personnel actions including firing. In practice, few feds are fired after their first year, in part because the appeal process does make taking such an action difficult, but also because many of the non-performers have been weeded out in that probationary year--they are either told to move down the road and leave voluntarily so they don't have a firing on their record, or the agency does fire them and they have virtually no recourse. Even tenured employees can be fired for either misconduct or poor performance, although again, appeal rights do apply and the agency has to make a case that its decision was proper.

I am a career employee with nearly 39 years of service (CSRS)... I am contemplating retirement in the next few months. I don't want to get caught in a change to a "high-five" or other travesty that could occur to reduce my GS-7 retirement figure any further. If Congress does initiate changes that could negatively impact us, will there be a window of time before legislation is signed or goes into effect that I'll have a chance to "get out while the gettin' is still good?" Thank you for any insight you can possibly provide.

A: Eric Yoder

As I wrote in an article the other day, there would have to be an effective date to anything like high-5, and that would indeed encourage employees who are currently retirement eligible to go out before that date. You'd have to do the math for yourself--with a two-year pay freeze on, there might not be much difference. But no one has set any date, so far.

Eric Yoder is an an award-winning writer and covers the federal government for the Washington Post.

Joe Davidson

Joe Davidson is the Federal Diary columnist at The Washington Post. For 13 years he was a Washington and foreign correspondent with The Wall Street Journal. Before joining The Post, he was editor of FOCUS, the magazine of the Joint Center for Political and Economic Studies. As the Federal Diary columnist, Joe covers a variety of issues related to federal employees and the federal workplace, a core area of coverage for The Post. Before writing the column, he was an assistant city editor.